Senators blast long-term care insurance premium hikes

By Alex M. Parker

October 14, 2009

Lately, Republicans and Democrats have wrangled over Afghanistan, health care and the economy -- but they found common ground on Wednesday afternoon blasting premium increases in the Federal Long-Term Care Insurance Program.

"If seniors are ripped off, they're not interested in politics. …They're interested in results," said Sen. Ron Wyden, D-Ore., during a joint hearing of the Senate Special Committee on Aging and a Senate Homeland Security and Governmental Affairs subcommittee on the federal workforce.

In May, the Office of Personnel Management announced that a new seven-year contract with John Hancock Life and Health Insurance Co. for long-term care insurance would result in premium hikes of up to 25 percent for certain enrollees with the automatic compound inflation option -- even though many of those policyholders thought they had locked in a permanent rate.

Some senators suggested that the government and John Hancock should work to ensure policyholders don't pay the increase.

"This is a typical example of the large print giveth, and the small print taketh away," said Sen. George LeMieux, R-Fla. "If we got it wrong in the government, it's not [policyholders'] fault. They shouldn't have to pay it."

Sen. Roland Burris, D-Ill., proposed legislation to ensure that current enrollees are grandfathered in to the new policy without a rate increase. He asked that the legislation be added as an amendment to a bill (S. 1177) from Sen. Herb Kohl, D-Wis., to increase oversight of long-term care programs.

John Hancock and OPM officials acknowledged that promotional materials advertising the automatic compound inflation option as way to guard against future rate hikes were misleading because they didn't explain that an increase was possible with a new contract. "I do think that it caused a lot of confusion, and I do regret that," said Marianne Harrison, president and general manager of long-term care insurance for John Hancock. "It wasn't up to our standards," said Daniel Green, deputy associate director for employee and family support policy at OPM.

But Sen. Susan Collins, R-Maine, accused Harrison of continuing to provide misleading information by stating in testimony that policyholders could avoid the rate increase without a cut in current benefits, by agreeing to coverage that includes 4 percent annual benefit increases instead of 5 percent. A difference of 1 percentage point might seem small, but over the long term it could add up to a significant loss of benefits, Collins noted. "I think that is extraordinarily misleading," she said.

Green and Harrison said the premium increase was necessary because of changes in the economy and increased costs of care. "We believe it would be irresponsible not to increase premiums at this time," Green said. Also testifying during Wednesday's hearing was Chester Joy, a former Government Accountability Office employee who paid $60,000 in premiums since enrolling in the program in 2002 , believing that the rate had been locked in.

"What's really galling to me is that, as current and former federal employees, what tipped the balance in favor of this program was that OPM was behind it," said Joy, adding that had he known all of the details of the plan, he likely wouldn't have signed up for it. "We could trust them."

At Kohl's request, Green said he would consider giving enrollees more time to consider their options under the new contract and to change their benefits to avoid a rate hike. The current deadline for making a decision is Dec. 14, and employees who do not make an election will remain at their current coverage level and be charged any accompanying premium increases in January. Harrison said there was a "silent grace period" for enrollees to make changes after the deadline, although she didn't say how long this period was.

Collins and Sen. Bob Corker, R-Tenn., both chided OPM Director John Berry for not appearing at the hearing, which was well-attended both by the public and by legislators.